Incoterms 2026: Complete Guide for Importers and Exporters
Incoterms (International Commercial Terms) define who is responsible for shipping costs, insurance, and risk at each stage of an international shipment. Getting them right can save you thousands -getting them wrong can be very costly.
What Are Incoterms?
Published by the International Chamber of Commerce (ICC), Incoterms are a set of 11 standardized trade terms used in international contracts. They define:
- Who arranges and pays for transportation
- Who arranges and pays for insurance
- Where risk transfers from seller to buyer
- Who handles customs clearance (export and import)
The 6 Most Common Incoterms
Seller makes goods available at their premises. Buyer bears all costs and risks from that point.
Best for: Experienced buyers with their own logistics
Seller delivers to a named carrier. Risk transfers when goods are handed to the carrier.
Best for: Most common for air and sea freight
Seller loads goods on the vessel. Risk transfers once goods are on board.
Best for: Sea freight -very common in China trade
Seller pays freight and insurance to destination port. Risk transfers when goods are on board.
Best for: Buyers who want seller to arrange shipping
Seller delivers to named destination, unloaded. Buyer handles import customs.
Best for: When seller has good logistics to destination
Seller handles everything including import duties. Maximum responsibility for seller.
Best for: Buyers who want a simple, all-inclusive price
FOB vs CIF: Which is Better?
This is the most common question I get. My recommendation: use FOB when buying from China.
With FOB, you control the freight booking and can shop around for the best rates. With CIF, the seller controls the freight and often marks it up. You also have less visibility into what carrier is used.
The only exception: if you're a very small importer without established freight relationships, CIF can be simpler -but you'll typically pay more.
Common Mistakes to Avoid
鉁?Using FOB for air freight
鉁?Use FCA instead -FOB technically only applies to sea freight
鉁?Agreeing to DDP without checking import duties
鉁?Always calculate expected duties before accepting DDP pricing
鉁?Using EXW without understanding the full cost
鉁?EXW sounds cheap but you bear all costs including export customs
鉁?Not specifying the named place clearly
鉁?Always include the specific location: FOB Shanghai Port, not just FOB China
Not sure which Incoterm to use?
I can review your supplier contract and recommend the right terms for your situation.
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